World Bank Group

The World Bank Group (WBG) is a family of five international organizations responsible for providing finance and advice to countries for the purposes of economic development and eliminating poverty. The Bank came into formal existence on 27 December 1945 following international ratification of the Bretton Woods agreements, which emerged from the United Nations Monetary and Financial Conference . Commencing operations on 1946, it approved its first loan on 1947 ($250m to France for postwar reconstruction, in real terms the largest loan issued by the Bank to date).

Its five agencies are:

* International Bank for Reconstruction and Development (IBRD)

* International Finance Corporation (IFC)

* International Development Association (IDA)

* Multilateral Investment Guarantee Agency (MIGA)

* International Centre for Settlement of Investment Disputes (ICSID)

The term “World Bank” generally refers to the IBRD and IDA, whereas the World Bank Group is used to refer to the institutions collectively.

The World Bank’s  activities are focused on developing countries, in fields such as human development (e.g. education, health), agriculture and rural development (e.g. irrigation, rural services), environmental protection (e.g. pollution reduction, establishing and enforcing regulations), infrastructure (e.g. roads, urban regeneration, electricity), and governance (e.g. anti-corruption, legal institutions development). The WB provides loans at preferential rates to member countries, as well as grants to the poorest countries. Loans or grants for specific projects are often linked to wider policy changes in the sector or the economy. For example, a loan to improve coastal environmental management may be linked to development of new environmental institutions at national and local levels and to implementation of new regulations to limit pollution.

The World Bank Institute is the capacity development branch of the World Bank, providing learning and other capacity-building programs to member countries.

Organizational structure

The Group’s headquarters are in Washington, D.C. It is an international organization owned by member governments; although it makes profits, these profits are used to support continued efforts in poverty reduction.

Technically the World Bank is part of the United Nations system, but its governance structure is different: each institution in the World Bank Group is owned by its member governments, which subscribe to its basic share capital, with votes proportional to shareholding. Membership gives certain voting rights that are the same for all countries but there are also additional votes which depend on financial contributions to the organization. The President of the World Bank is nominated by the President of the United States and elected by the Bank’s Board of Governors. As of November 1, 2006 the United States held 16.4% of total votes, Japan 7.9%, Germany 4.5%, and France and the United Kingdom each held 4.3%. As major decisions require an 85% super-majority, the US can block any such major change.

World Bank Group agencies

The IBRD has 185 member governments, and the other institutions have between 140 and 176 members. The institutions of the World Bank Group are all run by a Board of Governors meeting once a year. Each member country appoints a governor, generally its Minister of Finance. On a daily basis the World Bank Group is run by a Board of 24 Executive Directors to whom the governors have delegated certain powers. Each Director represents either one country (for the largest countries), or a group of countries.The Bank also serves as one of several Implementing Agencies for the United Nations Global Environment Facility (GEF).


The World Bank Group is headed by Paul Wolfowitz, appointed on June 1, 2005. Wolfowitz, a former United States Deputy Secretary of Defense, was nominated by President George W. Bush to replace James D. Wolfensohn. On May 17, 2007, it was announced that Wolfowitz would resign effective June 30, 2007. This was due to allegations of improper conduct involving Wolfowitz and his girlfriend who worked at the World Bank.

The President serves a term of five years, which may be renewed.By the same tradition, the International Monetary Fund’s Managing Director is nominated by its European governors.

Although nominated by the U.S. government, the World Bank President is subject to confirmation by the Board of Directors.


The World Bank has long been criticized by a range of non-governmental organizations and academics.The Bank’s own internal evaluations have drawn negative conclusions. Critics argue that the so-called free market reform policies – which the Bank advocates in many cases – in practice are often harmful to economic development if implemented badly, too quickly (“shock therapy“), in the wrong sequence, or in very weak, uncompetitive economies. In Russia, for example, some have suggested that it was an apparent shock therapy policy that has raised poverty from 2 million to 60 million, a 3000% increase.

Following decolonization, many African countries were ruled by dictators. These corrupt dictators stole much of the financial support lent by the World Bank, IMF, and other lenders, leaving an enormous national debt to their successors.

World Bank is often criticized, primarily by opponents of corporate “neo-colonial” globalization. These advocates of alter-globalization fault the bank for undermining the national sovereignty of recipient countries through various structural adjustment programs that pursue economic liberalization and de-emphasize the role of the state.

A related critique is that the Bank operates under essentially “neo-liberal” principles. In this perspective, reforms born of “neo-liberal” inspiration are not always suitable for nations experiencing conflicts (ethnic wars, border conflicts, etc.), or that are long-oppressed (dictatorship or colonialism) and do not have stable, democratic political systems.

One general critique is that the Bank is under the marked political influence of certain countries (notably, the United States) that would profit from advancing their interests. In this point of view, the World Bank would favor the installation of foreign enterprises, to the detriment of the development of the local economy and the people living in that country.

In terms of repayment; the Bank is a lender of foreign currency and demands to be repaid in the same currency. The borrower countries, in order to obtain the currencies to repay the loans, must sell to the rich countries more than they buy from them. However, the rich countries want to be net exporters, not importers. This generates “the transfer problem”, resulting in an accumulation of debts. Second, the high influence of the bank over national sovereignty. As a condition of the credit, the Bank offers advice on how countries should manage their finances, make their laws, provide services, and conduct themselves in the international market. The Bank has great power of persuasion, because if it decides to ostracize a borrower, other major international powers will follow the lead. On top of this, by excessive lending, the Bank has added to its own power and depleted that of its borrowers, generating a blatant inconsistency with its stated mission.

Defenders of the World Bank contend that no country is forced to borrow its money. The Bank provides both loans and grants. Even the loans are concessional since they are given to countries that have no access to international capital markets. Furthermore, the loans, both to poor and middle-income countries, are at below market-value interest rates. The World Bank argues that it can help development more through loans than grants, because money repaid on the loans can then be lent for other projects. Finally, it has made a major effort in recent years to address criticism, particularly regarding the environment and corruption, as well as to the legitimacy of its enormous influence and power.

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